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July 1 Is a Big Day for Student Loans

Tuesday, June 24, 2008

There are a few important dates when it comes to student loans and financial aid. The FAFSA becomes available on January 1. Many colleges and universities require a response to admissions letters and financial award packages by May 1. And on July 1 every year, new loan limits and interest rates kick in for federal loans. This year brings with it a number of significant updates that you and your parents should be aware of:

Interest Rates on Subsidized Stafford Loans Will Be Decreased

For those of you who received subsidized Stafford loans in your financial aid package, you benefit from a 0.8% reduction in Stafford interest rates. Interest rates will fall from 6.8 percent to 6.0% for subsidized Stafford loans made on or after July 1, 2008. For unsubsidized Stafford loans, the interest rate remains at 6.8%.

Loan Limits for Unsubsidized Stafford Loans Will Increase

As a result of recent legislation, undergraduate students can now borrow $2,000 more through the Stafford Loan program. You can read more about the loan limit increase in a previous post.

Variable Rates on Federal Loans Disbursed Prior to July 1, 2006 Will Change

If you took out a Stafford loan or your parents took out a PLUS loan prior to July 1, 2006, there is great news for you. Your interest rates for this year have dropped significantly. For Stafford loans in repayment, the variable interest rate drops to 4.21%. For Parent PLUS loans, the new interest rate will be 5.01%. Again, this only applies to loans disbursed prior to July 1, 2006.

Don't forget that our Student Loan Marketplace can help you find and compare student loans to help you find the best loan deal.

If you're looking for some additional resources about the July 1 changes, The Project on Student Debt offers their own Borrower's Guide to July 1, 2008.

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